The Select Committee of the Lok Sabha has submitted its detailed report on the proposed Income-Tax Bill, 2025. The Bill, introduced on February 13, 2025, aims to replace the six-decade-old Income-tax Act, 1961, and streamline the direct taxation system in the country. The report, tabled on July 21, 2025, by committee chairperson Shri Baijayant Panda, outlines 32 major recommendations across various clauses of the draft legislation.
The 31-member committee was tasked with reviewing the new Bill and addressing stakeholder concerns before the start of the Monsoon Session. Among the most significant suggestions are:
- Definition Revisions: The committee proposed aligning the definitions of "capital asset" and "infrastructure capital company" with recent statutory and economic changes, removing outdated cross-references from the repealed 1961 Act.
- Improved Deductions: Enhancements to clauses related to house property income, scientific research, employer pension contributions, and deductions for bio-degradable waste businesses were recommended to improve fairness and avoid interpretational ambiguity.
- Support for MSMEs & NPOs: Definitions for micro and small enterprises have been harmonized with the MSMED Act, 2006. For non-profits, the report emphasizes clarity on income treatment, anonymous donations, and preserving the "deemed application" rule from the old law.
- GAAR and Tax Avoidance: The committee backed restoring the phrase "in the circumstances of the case" under General Anti-Avoidance Rules (GAAR) to ensure procedural fairness and reduce arbitrary enforcement.
- Enhanced Clarity on Compliance: The panel called for explicit definitions (e.g., "parent company", "co-operative bank"), more flexible filing requirements for refunds, discretionary penalty powers, and extension of timelines for non-resident liaison office reporting.
- TDS and Refund Mechanisms: The committee advised restoring omitted terms such as "Nil" for clarity in TDS certificates, reintroducing non-obstante clauses to avoid ambiguity in provident fund taxation, and ensuring transparent refund eligibility when income is clubbed.
- Technical and Structural Corrections: Several clauses-such as on appeals, advance rulings, valuation qualifications, and repeal provisions-were recommended for redrafting to eliminate confusion and ensure smooth transition from the old law.
Click here to download: Report of the Select Committee on Income Tax Bill 2025
These recommendations aim to align the Income-Tax Bill, 2025 with modern business realities, simplify the tax framework, and ensure fairness to taxpayers while safeguarding government revenue.
The Ministry of Finance has accepted many of the committee's suggestions and is expected to incorporate the changes before final passage of the Bill. Once enacted, the new Income-Tax law is expected to form the backbone of India's direct taxation system for the coming decades.
Official copy of the Press Release has also been attached
CAclubindia
